Why having more retirement accounts isn't always better

Those old retirement accounts may prevent you from achieving your goals.

Contact an advisor for more information or to consolidate accounts.1


Maybe you think that by having multiple accounts—especially if they're at different financial institutions—you're diversifying by making sure your assets aren't all in the same place.

Did you know, though, that this strategy may cost you time and money and potentially leave you with investment redundancies and gaps? After all, when's the last time you really took a deep look at that retirement account from three jobs ago?

A time-proven solution for having too many retirement accounts is to consolidate those accounts.1 Here are a few reasons why keeping your accounts separate could be hampering your financial progress.

Your investments might not be as diversified as you think

An often-cited reason for having retirement accounts spread among different financial institutions is to diversify your investments. But consider someone who has six different accounts: They may be seeing some significant overlap in their investments.

Diversification not guaranteed1

Mutual funds at different companies may have similar holdings.

Mutual funds

When your portfolio isn't properly diversified, it's more likely to be negatively impacted by market fluctuations. This could have an impact on your ability to retire when you want. If you're already retired, it could mean your accounts provide you with less income than you were expecting.

Are you missing out on rebalancing?

When did you last check all of your old accounts? You may be a different kind of investor now than when you set them up, with a different risk tolerance and different goals. Choices you made in the past may not be right for your goals today.

If you set up a retirement plan with an aggressive investment mix (lots more equities than bonds, for example), and you now are more risk averse, your investments likely don't reflect that.

Similarly, stock market gains in the last decade may mean that equity investments make up a higher percentage of your portfolio than you initially intended.

If you have a holistic view of your investments and a strategy that is aligned with your goals, you're more likely to achieve them. A trusted advisor or resource can help you with this.

Should I consolidate my retirement accounts?

Having assets spread among several accounts may not just impact your returns. Consider these other common challenges of having multiple retirement accounts:

  • It's hard to track required minimum distributions (RMDs): As of January 1, 2020, the age to start withdrawing the minimum amount from your retirement accounts was changed to 72. If you have multiple accounts, you will need to determine how much to take from each account, which can be very complicated. Consolidating helps streamline the process, which may also help you avoid significant tax consequences associated with taking your RMDs incorrectly.
  • You may face additional fees: Some accounts may begin charging you a management fee if you're no longer contributing to them or no longer employed at your old company. When you consolidate, you may have access to a lower fee structure due to having more assets in one place.
  • Your loved ones could be affected at an emotional time: What would happen if something were to prevent you from being able to access your finances? Would your loved ones know where to look and how to take control of many different accounts? It's easy for something to be lost in the shuffle.
  • You'll have more paperwork: When you want to review your monthly or quarterly performance, you have to deal with multiple statements. Also, when you need to do things like update your beneficiaries, you have to do it for every single account.

A trusted source can help figure out what's right for you

Help yourself and your loved ones by talking with a TIAA advisor. You may well learn that consolidating retirement accounts may save you time and money, improve your portfolio diversification and help you pursue your goals more confidently.

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1Diversification is a technique to help reduce risk. There is no guarantee that diversification will protect against a loss of investment or income.

The TIAA group of companies does not provide tax or legal advice. Tax and other laws are subject to change, either prospectively or retroactively. Individuals should consult with a qualified independent tax advisor, CPA and/or attorney for specific advice based on the individual’s personal circumstances. Examples included in this article, if any, are hypothetical and for illustrative purposes only.

This material is for informational or educational purposes only and does not constitute fiduciary investment advice under ERISA, a securities recommendation under all securities laws, or an insurance product recommendation under state insurance laws or regulations. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on the investor’s own objectives and circumstances.

Advisory services provided by Advice & Planning Services, a division of TIAA CREF Individual & Institutional Services, LLC, a registered investment advisor.